David Ellison’s Paramount Skydance has asked a judge to force California Atty. Gen. Rob Bonta and his coalition of 11 other states to set aside as much as $1.9 billion as the Warner Bros. Discovery merger challenge heads into overtime.
In Monday’s court filing, Paramount requested the plaintiff states, including New York, Colorado, Oregon and Nevada, as well as the Writers Guild of America, post a bond that would cover some of its costs, including “ticking fees” Paramount promised to pay Warner shareholders should the deal stretch beyond its anticipated September close.
Ellison was confident that his proposed Warner takeover would sail through its regulatory clearances. President Trump’s Justice Department approved the merger in June, as have dozens of other countries.
The states would not be required to pay the full $1.88 billion upfront. Instead, they would have to come up with a portion of that amount by Sept. 30. Should the Democratic state attorneys general and WGA lose their lawsuits, they ultimately would have to pay the full amount.
Monday’s court filing highlights Ellison’s frustrations and the financial pressures of the deal delays. The filing also continues Paramount’s full-court political pressure campaign to get Bonta and the other states to abandon their antitrust lawsuit.
Ellison also has floated a proposal to move Paramount from its historic home base on Melrose Avenue to Tennessee — or perhaps Texas — as early as this fall.
“Once again, [Paramount is] trying to blackmail us to get us to back down,” Bonta’s office said Monday in a statement, blasting Paramount’s latest maneuver.
Paramount did not expect such a spirited challenge from Bonta and the 11 other Democratic state attorneys general who banded together with the WGA to try to block the $111-billion merger of two historic Hollywood studios. Paramount also would gain control of CNN (in addition to CBS News, which it already owns), HBO, HGTV and Turner Classic Movies.
Paramount’s 23-page filing, signed by former high-profile federal prosecutor Danielle Sassoon, was intended to rattle the states.
Ellison’s company is trying to create divisions among the plaintiff states by prompting them to question their resolve in fighting a potentially expensive legal battle, according to a person familiar with Paramount’s strategy who was not authorized to speak publicly.
Because the WGA has separately sued to unravel the deal, Paramount has asked the judge to have the union post a bond to cover some of the costs too.
In its motion, Paramount cited the Clayton Antitrust Act, which is the foundation for Bonta’s lawsuit. The law contains a provision to require plaintiffs to post a bond to cover the potential financial harms of halting a transaction.
The bond gives a defendant, in this case Paramount, a way to recover lost funds should they ultimately prevail in court. Paramount has insisted the merger would not threaten competition and that Bonta’s challenge is misguided.
With the approval of Mexican regulators last week, only the lawsuits from the WGA and Bonta and his coalition stand in the merger’s way.
“We have satisfied all closing conditions under our merger agreement, having received regulatory clearances from 68 jurisdictions,” Paramount said in a statement. “These two lawsuits are the only barrier to closing this transaction.”
Bonta’s office also noted that Paramount previously had not sought a bond from the plaintiffs. U.S. District Judge Araceli Martínez-Olguín also stopped short of requiring one.
But after Martínez-Olguín set the trial for March 2 — instead of November as Paramount had asked — the company grew antsy and toughened its legal tactics.
“Paramount and Warner Bros. are two sophisticated companies who willfully decided to include a costly ticking fee as a provision in their merger contract,” Bonta’s office said in a statement. “They knew this merger would undergo regulatory review; they knew it was not a done deal; and they chose to include it anyway.”
In February, Paramount agreed to pay Warner investors ticking fees of 25 cents a share for every quarter until the acquisition finalizes. The fees add up to $7 million a day, or $650 million per quarter.
When the trial concludes, Paramount will be on the hook for $1.3 billion in such fees, the motion said.
Some interested parties have urged a settlement. However, should the case go to trial, it might not be decided until May.
By that time, some regulatory approvals that Paramount secured will have expired — prompting Paramount to return to the Justice Department and various other international regulators to ask for an extension.
Paramount is facing a June 4 deadline to close the deal. That’s when Warner Bros. Discovery can demand a $7-billion breakup fee.
The protracted court timeline brings other costs too, Paramount argued.
“There will be no integration and no ramped-up investment in content, production, and creative talent by the combined company,” Paramount said. “Employees of both Paramount and WBD are also harmed by the uncertainties caused by the delay.”
Last week, the Directors Guild of America and the International Alliance of Theatrical Stage Employees — which represent a combined 200,000 union members — waded into the clash over the merger, which continues to carve deep divisions throughout the industry.
Paramount shares gained 1.4% on Monday to close at $10.28. Warner shares held steady at $27.93, despite Paramount’s pledge to pay at least $31 a share to get the deal done.
“We look forward to closing this transaction and delivering its benefits to consumers and entertainment industry workers in California, the United States and around the world,” Paramount said.
